Louisville’s pluses help it land Chesapeake facility

Chesapeake Energy was looking for a large piece of land, and a few special extras when it shopped for a regional field office. Louisville had the land and the extras.

Edd Pritchard

Quality schools. Quiet, peaceful streets. A lot of churches.

Combine those factors with nearly 300 acres of vacant land next to a major railroad line.

Now you know why Chesapeake Energy is building a regional field office in Louisville.

Chesapeake began looking at Ohio’s Utica Shale formation in 2009, affiliating with local companies to begin signing leases.

After spending 2010 securing drilling rights, Chesapeake began looking for a place to build a regional field office. The company focused on Stark County and considered more than a dozen sites. Last July the Oklahoma City company bought 284 acres in the Beck Industrial Park on Louisville’s south side.

The parcel’s size allows for construction of a 1,000-foot rail spur from the Norfolk Southern rail lines that border the property.

But finding a plot to build on was only part of the search. Chesapeake wanted to make certain the facility was in the right spot; a place the company’s employees would happily call home.

“They made it clear to us that they wanted to be part of the community, that their people wanted to be part of the community,” said City Manager Tom Ault.

As Chesapeake studied the property, company officials asked about the city’s schools and the crime rate. They wanted to know about the churches.

Mayor Patricia Fallot happily pointed out that Louisville City Schools have a state report card rating of “Excellent.” The crime rate is low and the police force is effective. And it seems that there’s a church on every corner.

Over the past 10 years Chesapeake Energy, which was founded in 1989, has grown to become the nation’s second largest natural gas producer and a leading oil producer.

The company climbed toward the top by drilling into shale and other unconventional rock formations around the country. In 2010 Chesapeake began signing leases in the Utica Shale, confident the formation would produce oil and liquid natural gas. By 2011 the company had secured more than 1 million acres, in part by spending $850 million to buy 500,000 acres from Anschutz Corp.

In a deal that closed at the end of 2011, Chesapeake teamed with EnerVest and Total S.A., a French oil and gas company, in a joint venture to develop 619,000 acres — 542,000 from Chesapeake and 77,000 from EnerVest. Total paid $2.32 billion for a 25 percent stake in the development. The deal gave Chesapeake cash to step up its drilling program.

At this point Chesapeake is viewed as the biggest player in the Utica Shale development. The company has the largest lease holdings and has received more than 300 permits to drill horizontal wells in eastern Ohio. Chesapeake has drilled the Marcellus shale in southeast Ohio, but is focused on the Utica formation and developing wells in Carroll, Columbiana and Harrison counties.

The company has projected that its acreage “could support more than 4,000 wells in the Utica Shale over the next couple of decades,” Steve Dixon, acting chief executive officer, told industry observers in November.

CORPORATE CHANGE

Up until this past month, Chesapeake co-founder Aubrey McClendon has led the company. McClendon’s aggressive approach and vocal support for natural gas drew attention to the company, and some of his business dealings gradually came under fire. Last year Reuters news service reported that McClendon borrowed more than $1 billion against his personal stake in thousands of Chesapeake wells. That news led to his removal as board chairman, and in January he announced plans to retire.

Before problems surfaced, McClendon played an active role in Chesapeake’s Utica Shale decision making.

McClendon gave final approval on buying the Louisville site for a regional field office, and visited the site during the spring of 2012. McClendon also gave the final okay on the location for a natural gas processing facility being built near Kensington, according to published reports. While Chesapeake played a part in selecting the site, the company no longer is involved with the project. Chesapeake sold its midstream operations, which collects and processes oil and gas, last year to offset debt.

The corporate upheaval hasn’t slowed Chesapeake’s activity in Ohio. It remains the state’s busiest driller with 14 rigs operating here. The company is working to increase its oil and wet gas production and counting on Utica wells to play a big roll in the switch away from dry gas.

Dixon, who is acting chief executive now that McClendon is gone, touted Utica production in a statement earlier this month aimed at reassuring shareholders.

Chesapeake has several positive developments underway with its Utica operations, Dixon said. He predicted that when the year ends Chesapeake’s Utica wells should be producing 55,000 barrels of oil equivalent per day, much of it as oil and liquid natural gas.

LANDING 400 JOBS

Construction has been under way for several months at the Louisville site.

City officials and developer Groffre Investments began preparing the property in 2009, pursuing state grants to build a new road and bridge over the East Branch of the Nimishillen Creek.

City Manager Ault figured the property would sell slowly and likely be split between as many as five or six companies. He hoped the development might attract 400 jobs. “I never thought a single business would buy that land,” Ault said. Landing 400 new jobs with one company also is a surprise.

A five-story office building will be part of the Chesapeake complex, along with a second maintenance facility. The rail spur will allow up to 100 cars per day to unload sand that will be stored in 150-foot-tall silos. Part of the property’s west side has been graded and is a storage area for equipment used by Great Plains Oilfield Rental, a Chesapeake subsidiary.

Once Chesapeake’s regional field office is up and running, the company will be Louisville’s second largest employer behind the Louisville City Schools. The oil company will leap past established companies such as ATI Allegheny Ludlum and H-P Products.

ALREADY ACTIVE

Until the new facility is built, Chesapeake is maintaining offices in Canton. But the company’s impact already has been felt in Louisville, Ault and Fallot said

Chesapeake employees have joined the Louisville Area Chamber of Commerce and joined the Constitution Committee.

City officials wonder if Chesapeake’s arrival marks the beginning for a business and development boom for the community. Developers are preparing in case outside companies have an interest in property. Ault said he’s seen a number of new faces in local restaurants and more vehicles bearing out-of-state license plates.

Ault said the city is looking at its infrastructure, anticipating the need to improve city streets in anticipation of increased traffic. The city bought 7.7 vacant acres of land at S Chapel Street and Enterprise Circle in case growth forces the need for additional city services. The property might become home for a new police station or other city facility.

“As we see the need we’re making the changes,” Ault said.

The entire region is seeing growth because of interest in the Utica Shale, Fallot said. “It’s good for Stark County as a whole.”

Reach Edd at 330-580-8484 or edd.pritchard@cantonrep.com

On Twitter: @epritchardREP

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